life insurance products fall into one of two …...term life insurance can also cover specific...
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For Financial Professional Use Only. Not for Use With the Public.
Life insurance products fall into one of two categories: term or permanent. Both can play an essential role in planning a secure future for families.
TERM INSURANCEA term life policy provides coverage for a specific period of time, such as 10, 20, or 30 years, during which level premium payments are made. Clients are covered while the policy is in force. When the policy’s level premium period ends, the client can elect to renew the policy for an annual renewable term policy. This is generally available without the need for additional underwriting, but the annually renewable term rates will be higher than the level period rates.
When considering life insurance, term life insurance can be a good first choice — especially for families just starting out. Because term insurance is generally quite affordable — particularly for younger ages or temporary insurance needs — term life insurance is an easy way to help provide financial peace of mind for families. The death benefit will help a client’s beneficiaries fill the gap left by the loss of income and may help in preserving assets such as their home. Term life insurance can also cover specific financial obligations that will disappear over time, such as a mortgage or loans.
Because term life insurance is not permanent life insurance, it does not build cash value. There’s no commitment, either. If your client decides to end their coverage before the term is up, they can simply stop making payments and that’s it — there aren’t any other obligations. And if they should change their mind, there is a grace period during which they can reinstate the policy.
INSURANCE 101
TERM VS. PERMANENT INSURANCE
For Financial Professional Use Only. Not for Use With the Public.
PERMANENT INSURANCEPermanent life insurance doesn’t limit the death benefit to a specific span of time. There’s always a payout, regardless of when the insured dies, as long as the policy remains in force. What’s more, permanent life insurance can build a cash value, which grows with each payment made in excess of the policy charges. Because of these valuable benefits, premiums for permanent life are usually higher than those for term life. In addition, certain types of permanent insurance also offer premium payment flexibility. Keep in mind, permanent life insurance requires a long-term commitment since a surrender charge is typically applied if a policy is canceled during the first ten to fifteen policy years. Canceling a policy after only a few years can be expensive.
With permanent insurance, your client’s premium dollars less a premium expense charge are applied to the policy’s account value. From the account value, deductions are made to pay the cost of insurance and expenses associated with providing the policy. What’s left over becomes the net cash value, which takes into account policy surrender charges, if applicable.
For Financial Professional Use Only. Not for Use With the Public.
* Subject to certain minimums and maximums.
** Loans, withdrawals, and death benefit accelerations will reduce the policy value and death benefit. Provided the policy is not and does not become a modified endowment contract (MEC), 1) withdrawals are tax-free to the extent that they do not exceed the policy basis (generally, premiums paid less withdrawals) and 2) policy loans are tax free as long as the policy remains enforce. If the policy is surrendered or lapses, the amount of the policy loan will be considered a distribution from the policy and will be taxable to the extent that such loan plus other distributions at that time exceed the policy basis. Please consult with and rely on your tax advisor regarding your particular situation.
*** If you surrender your policy, a surrender charge may apply. The surrender charge is a charge of $1,000 of the initial face amount and each increase in face amount. The surrender charge applies for the first 15 policy years for 15 years from the date of any face amount increase. Charges are based on the face amount of the policy and the insureds age, gender, and rate class. These charges may be significant and should be carefully considered before surrendering the contract.
LIVING BENEFITS**
Withdrawals
Policy loans
Terminal Illness Accelerated Death Benefit Rider
DEATH BENEFITS**
Federal income tax-free proceeds paid at death
TAX-DEFERRED ACCUMULATON
EARLY POLICY SURRENDER***
Surrender charges may apply and any gain is taxable
DISTRIBUTIONS
LESS
POLICY VALUE
Index Account monthly charge
Monthly Deductions:
Cost of insurance
Per unit charges
Monthly policy charges
Additional rider charges
LESSPremium Expense Charge
Net Premium Allocation Choices
Interest Interest
1Global Index Account (GIA) 2 S&P 500®
Index (IA) 3Basic Interest Account (BIA)
FLEXIBLE PREMIUM PAYMENT*(OWNER CONTROLLED)
TRANSAMERICA FINANCIAL FOUNDATION IULExample of Premium Flow:
121038R1© 2019 Transamerica. All Rights Reserved.
Loans, withdrawals, and death benefit accelerations will reduce the policy value and death benefit. Provided the policy is not and does not become a modified endowment contract (MEC), 1) withdrawals are tax-free to the extent that they do not exceed the policy basis (generally, premiums paid less withdrawals) and 2) policy loans are tax-free as long as the policy remains in force. If the policy is surrendered or lapses, the amount of the policy loan will be considered a distribution from the policy and will be taxable to the extent that such loan plus other distributions at that time exceed the policy basis.
The S&P 500 Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by the company. Standard & Poor’s®, S&P®, and S&P, 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by the company. This policy is not sponsored, endorsed, sold, or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of purchasing this product(s), nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.
The company and its agents do not give tax or legal advice. This material and the concepts presented here are for informational purposes only and should not be construed as tax or legal advice. And tax and or legal advice that you may require or rely on regarding this material should be based on the particular circumstances and should be obtained from an independent professional advisor.
For Financial Professional Use Only. Not for Use With the Public.
10/19
POLICY WITHDRAWALSThe policy owner may withdraw up to the sum of the premiums in the policy tax-free. The policy’s cash value will be reduced by the withdrawal amount and any withdrawal fees. A withdrawal will also reduce the policy death benefit.
POLICY LOANSThe policy owner may take money out of a life insurance contract through a policy loan, where loan interest is charged. In most cases, the maximum amount that may be borrowed is equal to the policy cash value less:
• Any existing loan balance• Interest on the loan balance to the end of the policy year, and• The amount of the surrender charge that would apply on a surrender of the policyfor its cash value
When a loan is made, an amount equal to the loan is transferred to a loan reserve account and is credited interest according to the policy terms. If the loan isn’t repaid, and it doesn’t have to be, Transamerica will deduct the outstanding loan amount from the final death benefit payout to the policy’s beneficiary.